Tuesday, April 8, 2014

Corinthian College Inc. sued in Massachusetts

Massachusetts Attorney
General Martha Coakley filed suit Thursday against Corinthian College Inc. alleging it had used aggressive and deceptive marketing and
loan tactics to increase enrollments and boost profits.

Corinthian
Colleges Inc. and Corinthian Schools Inc., the publicly traded industry giant
with about 100 campuses in North America lured students with misleading
promises of employment and pay, and left them burdened with heavy debts,
according to the complaint filed in Suffolk Superior Court.

Corinthian
is the parent company of Everest College, which opened in Milwaukee in 2010 and
closed less than a year and half later with a job placement rate of less than
6% and graduation rates below 50%.

Massachusetts is the latest state to take Corinthian to court. Despite settling with the state of California for almost $7 million in 2007 Corinthian has again been sued by that state's Attorney General, Kamala D. Harris, over similar allegations.

In
Massachusetts Corinthian pushed students to take out subprime loans through the
school, which charged interest rates as high as 18 percent, so they could
qualify for federal student loans, Coakley alleged in the complaint.

“They
are promising both quality in education and employment rates that they just
can’t deliver on,” Coakley said in an interview. “The only ones who are doing
well in this appear to be the investors on Wall Street.”

Corinthian
spokesman Kent Jenkins disputed the facts in the complaint and said after a
three-year investigation, Coakley’s office had failed to produce a single
complaint from a student at either Massachusetts location.

“The
Massachusetts Attorney General’s Office disregards substantial, independent
evidence that our two schools in Massachusetts have a strong record of offering
students a quality education and treating them honestly and fairly,” the
company said in a three-page statement. “We will vigorously defend the record
of our campuses in Massachusetts.”

The
lawsuit against Corinthian is the latest action against for-profit schools by
Coakley, whose office been investigating the industry in recent years. In
October, Coakley’s office reached a $425,000 settlement to reimburse former
students of Sullivan & Cogliano Training Centers, Inc., a Brockton-based
for-profit career school, for allegedly misrepresenting job placement numbers
and making misleading statements about its medical field training programs.

The
following month, Coakley’s office filed a lawsuit against the Career Institute of
Framingham, alleging it falsified student signatures, enrollment
records, attendance, and grades to receive proceeds from government-funded
student loans. Coakley alleged the schools failed to provide students with
course material and training, while leaving them tens of thousands of dollars
in debt. The Career Institute, which operated as American Career Institute and
shut down last year, denied the allegations. The case is ongoing.

Corinthian
is one of the biggest players in for-profit education in the United States,
generating $1.6 billion in revenue in 2013, according to its annual report. In
Massachusetts, Corinthian operates Everest Institute, which has campuses in
Brighton and Chelsea. Corinthian said in its statement that it had stopped
enrolling new students at the Brighton campus and is seeking a buyer. Classes
there will end in October.

Corinthian
subsists largely on taxpayer-backed loans to students and focused on recruiting
new students regardless of their qualifications or whether they were likely to
complete or benefit from Corinthian’s programs, according to court documents.
In Massachusetts, the schools offered training for dental and medical
assistants, administration, medical insurance billing and coding, and massage
therapy.

The
Corinthian case represents the first time Coakley’s office has alleged that a
for-profit school, acting as a lender, engaged in a loan scheme. In order to
qualify for federal student loans, Coakley said, students had to pay a portion
of the schools’ $14,000 to $16,000-a-year tuition themselves. Corinthian
offered the students private loans with interest rates as high as 18 percent to
help them qualify.

The
legal complaint cited unnamed students who said instruction was inadequate.
Some students were required to sign a statement that they had landed a job in
order to receive their degree, a way for the school to inflate its job
placement statistics, according to the complaint.

Toby
Merrill, a lawyer at the Legal Services Center of Harvard Law School in Jamaica
Plain, said she
has offered legal assistance and representation to many former Corinthian
students who were dissatisfied with their schooling and unable to repay their
loans. She described Corinthian as “a leader in the field” of disgruntled
students.

“There’s
a lot of high pressure predatory practices and fraud directed at people who are
definitionally the least able to understand it, “ she said. “These are people
who have not been successful in traditional educational settings.”

Corinthian
defended its practices, saying for the last 12 years in Massachusetts, it has
provided educational opportunities to nontraditional students such as single
mothers by offering flexible class schedules.

About
500 students attend both schools in Massachusetts at any given time, and the
company said its graduation rates are about 60 percent, surpassing graduation
rates in the state’s community college system. Graduates also land jobs between
57 and 88 percent of the time, depending on the degree.

This post is based on an article by the Boston Globe's Megan Woolhouse.